Correlation Between Beijing Shunxin and China Express

Can any of the company-specific risk be diversified away by investing in both Beijing Shunxin and China Express at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Beijing Shunxin and China Express into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beijing Shunxin Agriculture and China Express Airlines, you can compare the effects of market volatilities on Beijing Shunxin and China Express and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Beijing Shunxin with a short position of China Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Shunxin and China Express.

Diversification Opportunities for Beijing Shunxin and China Express

0.57

Correlation Coefficient

Beijing Shunxin  China Express

Very weak diversification

The 3 months correlation between Beijing and China is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Shunxin Agriculture and China Express Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Express Airlines and Beijing Shunxin is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Beijing Shunxin Agriculture are associated (or correlated) with China Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Express Airlines has no effect on the direction of Beijing Shunxin i.e., Beijing Shunxin and China Express go up and down completely randomly.

Pair Corralation between Beijing Shunxin and China Express

Assuming the 90 days trading horizon Beijing Shunxin Agriculture is expected to under-perform the China Express. But the stock apears to be less risky and, when comparing its historical volatility, Beijing Shunxin Agriculture is 1.03 times less risky than China Express. The stock trades about -0.01 of its potential returns per unit of risk. The China Express Airlines is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  695.00  in China Express Airlines on October 9, 2024 and sell it today you would earn a total of  26.00  from holding China Express Airlines or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Beijing Shunxin Agriculture  vs.  China Express Airlines

Beijing Shunxin Agri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Shunxin Agriculture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Beijing Shunxin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Express Airlines

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Express Airlines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Beijing Shunxin and China Express

The main advantage of trading using opposite Beijing Shunxin and China Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Shunxin position performs unexpectedly, China Express can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Express will offset losses from the drop in China Express' long position.

The idea behind Beijing Shunxin Agriculture and China Express Airlines pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.